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I am a IT consultant with an interest in value investing. Becoming a successful, knowledgeable investor is a long arduous journey. I hope to share stock investing ideas. Join me in embarking on this learning journey! Visit author's blog http://valuestocksinvesting.blogspot.sg
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  • Coach Inc (COH): An Undervalued Luxury Brand

    Background

    Coach is one of the most recognized brands in the luxury goods industry. It is a leading marketer of fine accessories for women and men, including handbags, women's and man's leatherwear, footwear, travel bags, watches, fragrances and related accessories. Coach was established in 1941 and sold to Sara Lee for $30 million in 1985. Sara Lee Corporation then sold 19.5% of the shares in an IPO in October 2000. Since listing of the company in New York Stock Exchange, Coach has grown to be the number one brand within the U.S premium handbag and accessories market.

    Business Model

    Coach's merchandise is sold through Coach stores, factory outlets, select department and specialty stores, duty free locations in airports and online via their website, coach.com. It groups its business into 2 segments, namely Direct-to-Consumer and Indirect. Over 85% of the company's sales are generated by Direct-to-Consumer segment, with the majority of the sales coming from selling handbags and accessories.

    Coach markets itself as selling "accessible luxury" and its pricing strategy for a handbag ranges from $298 - $1000 which means that its product reaches a larger consumer demographic than other high-priced competitors such as Louis Vuitton, Prada which focus on the very wealthy. The strategy of targeting the higher and upper middle income shoppers differentiates Coach from its competitors and also helps to establish it as the poster child of tapping into this global trend of consumers wanting to trade up in the quality and style of what they buy.

    As Warren Buffett says "In business, I am looking for economic castle protected by moats", Coach has a narrow moat and competitive advantage. It has a strong brand presence in the luxury market and this is not easily eroded by other competitors. New competitors into the luxury brand industry will have to spend a large amount of money and resource to build up brand awareness and image. There is also consumer loyalty as Coach has been delivering high quality products that is simple, reliable and perceived value for the money.

    To further grow the business, Coach has outlined its strategy of (i) raising its brand awareness and market share in under-penetrated Asian market with China being the top targeted market (ii) growing its woman's business in North America and European market (iii) increasing its men's business in North America and Asia (iv) maximizing e-commerce sales

    Why is Coach a screaming buy?

    Coach is a great company to invest in for a multitude of reasons. Coach has executed its strategy successfully over the past decade. Its revenue has grown progressively every year at a compounded growth rate of 21%. This is a mean feat considering that it is in a highly competitive sector. It has also showed that it is able to grow through strong or weak economies as evident by the increase in sales in 2009. The ability to keep increasing revenue shows the strength of its pricing strategy.

    To continue reading why Coach is an undervalued stock, click here

    Tags: COH, Luxury goods
    May 05 9:13 PM | Link | Comment!
  • Top 10 Investment Books For Superinvestors

    There are many recommended reading list on the best investment books to read to gain a better knowledge on investing. Many of these reading lists purely just state the book title and author without telling the reader why and how these books will benefit them. Moreover, most of these reading lists are catered for the beginner investor. To address the gap, I decided to come up with my own top 10 investment books that cater to all types of investors as well as those that are recommended by famed superinvestors such as Warren Buffett, Howard Marks, Seth Klarman and etc. I believe in Mohnish Pabrai's idea of cloning where he said that an investor would dramatically improve their results if they simply copied what Buffett and other value investor does. We not only can copy the stock ideas of these superinvestors, we can also read the books that they read or recommended.

    The selection of the books is based on the depth of investment concepts covered and recommendations of these superinvestors. The reading list has been sorted in order of difficulty. Here are my top 10 investment books.

    1. Economic Moats: The Little Book that Builds Wealth by Pat Dorsey [Easy]

    As Warren Buffett says "In business, I look for economic castles protected by unbreachable moats". The wider the economic moat of a business, the more likely it is to stand the test of time. When Buffett purchases a business, he pay careful attention to economics of the industry and if the business has an enduring competitive advantage

    This little book by Pat Dorsey explains the company's economic moat as the measure of its ability to withstand competitive threats and tough economic times. It is a quick read and provides detailed analysis about the different types of durable competitive advantages a.k.a. moats, that a company achieves. It teaches the beginner investors how to identify business with wide moat when you see one. Some attributes to identify an economic moat include customer stickiness, intangible assets, the durability of earnings power etc. If investors can identify companies with moats and purchase their shares at reasonable prices, investors will be able to do well in their investments

    1. Moneyball: The Art of Winning an Unfair Game by Michael Lewis [Easy]

    Money ball tells the fascinating tale of Billy Beane's ingenious use of statistical analysis in order to assemble a winning team without the luxury of a large payroll. The book talks about how the Oakland Athletics selected undervalued players and won its division. The book is just as much about value investing as it is about baseball. Just as Billy Beane analyze baseball players objectively based on the relationship of a player's salary to quantitative measurements like on-base percentage, value investors analyze stocks objectively based on the relationship of a stock's market price to quantitative measurements like its discounted cash flow.

    3. Fiasco: The Inside Story of a Wall Street Trader by Frank Parindy [Easy]

    Recommended by Charlie Munger, the vice chairman at Berkshire Hathaway is known to be an intellectual man and this book is highly recommended by Charlie Munger as an essential investment book for investors. FIASCO is the shocking story of one man's education in the jungles of Wall Street. As a young derivatives salesman at Morgan Stanley, Frank Partnoy learned to buy and sell billions of dollars worth of securities that were so complex many traders themselves didn't understand them. In his behind-the-scenes look at the trading floor and the offices of one of the world's top investment firms, Partnoy recounts the macho attitudes and fiercely competitive ploys of his office mates. This book is considered to be the first on the derivatives trading industry

    4. You can be a Stock Market Genius! By Joel Greenblatt [Intermediate]

    This is a book written by one of the superinvestors, Joel Greenblatt. He is founder and managing partner of Gotham Capital and is well known for the invention of Magic Formula Investing. This book is his first book before the now famous "The Little Book That Beat the Market". This book covers a wide range of topics, some of which might be a tad complex for the beginner investor. It focuses on special situations such as spin off, bankruptcy, restructuring and merger securities. The book is filled with case studies and examples.

    Fund manager Joel Greenblatt has been beating the Dow (with returns of 50 percent a year) for more than a decade and this book is filled with his insight in areas where the individual investor has a huge advantage over the Wall Street wizards. This book is on Seth Klarman's and Dan Leob's must read list. If this book finds its place in one of the superinvestor's reading list, it should definitely be on your reading list as well.

    5. Margin of Safety by Seth Klarman [Intermediate]

    This book is one of the most highly sought after investment books of all time. The title of the book suggests that it is all about value investing and how seeking a margin of safety helps to ensure positive stock market return. This hard-to-find and out-of-print book is a must for aspiring investment aficionados. It is written by one of the most successful hedge fund managers of our time, Seth Klarman. Klarman explains the value investing philosophy, the logic of the value investing strategy, and why value investing succeeds over the long term. The book is organized into three parts, namely (1) Where Most Investors stumble (2) A Value-Investment Philosophy (3) The Value-Investment Process. "Margin of Safety" is recommended by David Einhorn and is a must-read for investors.

    6. The Intelligent Investor by Benjamin Graham [Intermediate]

    This book is considered as the bible of value investing and almost all superinvestors had read and benefitted from this book. Warren Buffett read the first edition of "The Intelligent Investor" early in 1950, when he was 19. To him, it was like seeing the light. He said: "I thought then that it was by far the best book about investing ever written. I still think it is." This book is written by the "Father of Value Investing" and recommended by Warren Buffett, the greatest investor of all time. There should be no further explanation on why this is one of the top 10 books that must be found on any serious investor's bookshelf.

    7. Winning the Loser's Game: Timeless Strategies for Successful Investing by Charles Ellis [Intermediate]

    Recommended by Howard Marks, this is one of the most useful investment strategy book and it provides solid and clear concepts. Ellis explains how to avoid common traps and get on the road to investment success. After reading the book, readers will be able to create an investment program based on the realities of market. The book has since sold half a million copies and is highly recommended by late management guru Peter Drucker as one of the best book on investment policy and management.

    8. Value Investing: Graham to Buffett and Beyond [Difficult]
    This is one of the best books on value investing. Bruce Greenwald is also a professor at Columbia's Business School, and director of research at First Eagle Funds. The book is divided into three parts: an overview of what value investing is; an examination of three specific approaches to value investing; and case studies of several well-known value investors and the ways they put the tenets of value investing into practice. It explores the way value investing evolved over the years and how the basic concepts were used and modified by Graham disciples to support the present environment without letting past concepts be forgotten. Though the book provides a deep insight into value investing, it can sometimes be a bit technical and therefore reads like a college text.

    9. Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud by Howard Schilit [Difficult]
    This book is highly recommend by Dan Leob, the fund manager of Third Point. This book takes an in-depth look at accounting fraud and how to identify warning signs of a company's impending problems. Obviously this book makes sense for anyone looking at balance sheets, 10-Q's and 10K's on a regular basis. A must-read for people who like detailed analyses of companies and financials

    10. Quality of Earnings by Thornton O' Glove [Difficult]
    This is a lesser known book among investors but is a great book if you want to deepen your understanding of analyzing companies and valuation. It teaches you how to understand the various financial information companies provide. Readers will learn how to interpret the financial statements from an investor point of view. This book found its place in the top 10 list via a recommended by Bill Ackmann, who is famous for shorting Herballife

    Apr 29 12:02 PM | Link | Comment!
  • 7 Top Stocks Owned By Value Investors Every Investor Should Know

    Mohnish Pabrai, one of my favourite investors, delivered a lecture on value investing at the UC Davis Graduate School of Management in 2012 where he explained his philosophy of how we can all become great investors. He introduced the idea of cloning and said that an investor would dramatically improve their results if they simply copied what Buffett and other value investor does.

    What is cloning?

    Based on Mohnish, cloning is a powerful concept and the best strategy. It involves reverse engineering trades which meant applying the knowledge and expertise gained by the notable investors (the likes of warren Buffet, Charlie Munger) in our investing methodologies.

    So does cloning really work? Mohnish Pabrai explained that a study by Gerald Martin and John Puthenpurackal ("Imitation is the Sincerest Form of Flattery") had proved that if investors had just bought the stocks that Warren Buffett had bought, months after the official announcement, and at significantly higher prices than what Warren Buffett paid for them, they would have made a lot of money. Investors where Mohnish Pabrai would closely follow include Seth Klarman, fund manager of Baupost, Longleaf Partners, Greenlight Capital, Pershing Square, Third Avenue and Fairfax Holdings.

    The best way to practice cloning is to keep an eye on what the big investors are buying. This article will further extend the idea of cloning and look at the top 7 stocks bought by value investors in the Q1 2013 so that we can clone their actions and stocks bought.

    1. Microsoft (NASDAQ:MSFT)
    Microsoft is currently owned by 55 gurus with some of the most notably being Donald Yacktman, David Einhorn, Mason Hawkins of Southeastern Asset Management, Ron Muhlenkamp etc. In Q1 2013, investors such as Donald Yacktman, Steven Romick (FPA Crescent Fund), Thomas Russo added their stock holdings in Microsoft by 5% to 50%

    Microsoft has been active in innovating new products, with the releases of Windows 8, Windows Phone 8 and Windows Surface tablet. Investors see Microsoft as having a dominant global franchise, an opportunity to increase its earnings in the emerging markets. The stock is selling at a low multiple of its cash flow and low multiple of earnings. Since the gurus bought it, the stock has been up 5%

    2. Oracle (NYSE:ORCL)

    Orcale is a provider of enterprise software and a provider of computer hardware products and services. Its software, hardware systems, and services businesses develop, manufacture, market, host and support database and middleware software, applications software, and hardware systems, with the latter consisting mainly of computer server and storage products. Oracle makes hardware and software for the cloud and data centers, with 100 of the Fortune 100 as their clients. Oracle is currently owned by 34 gurus such as Seth Klarman, Lou Simpson (an investor that Warren Buffett trusts), Tom Russo, Ruane Cuniff etc. In Q1 2013, Glenn Greenberg (Brave Warrior Advisors), Lou Simpson, Thomas Gayner (Markel Asset Management) bought the stock. Oracle's balance sheet contains approximately $37 billion in cash, with $19 billion in long-term liabilities and debt. The company has also been generating higher annual free cash flow for a solid decade.

    To continue reading the article, please click here

    Disclosure: I am long ORCL.

    Apr 23 12:02 PM | Link | Comment!
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